Friday, 30 September 2016

Zooko Wilcox has more than 20 years of experience in open, decentralized systems, cryptography and information security, and startups. He is recognized for his work on DigiCash, Mojo Nation, ZRTP, ?'?œZooko?'?s Triangle?', Tahoe-LAFS, BLAKE2, and SPHINCS. He is also the Founder and CEO of Least Authority. He sometimes blogs about health science.

In recent years, progress in the area of zero knowledge proofs has made it possible to construct a blockchain whose miners can verify transactions, or state changes, without seeing the information contained in those transactions. Many of the individuals developing these tools have joined Zooko to form the Zcash company. Zcash aims to be a truly anonymous cryptocurrency, but more than just a currency, it is the first step toward managing privacy on public blockchains. Recently, at the Cornell University blockchain hackathon, Zcash team members participated in a successful effort to include an implementation of zero knowledge proofs known as ZKsnarks into an ethereum client running on a test net a monumental achievement in blockchain anonymity. In addition to this, the Zcash team are using the BTCRelay codebase to construct ZRelay, a bridge between the Zcash, Ethereum and Bitcoin blockchains.

The final third of this episode is a casual discussion of the culture of the field of cryptography roughly between 1990 and 2000.

It is generally accepted that latency in block propagation is one of the bottlenecks for Bitcoin scaling. This is why many of Bitcoin’s most active developers and researchers have presented a series of solutions to compress blocks and speed up propagation over the past years.

It is not as well known that these solutions may not suffice on their own. Due to a practice called “spy mining” or “pool-watcher mining,” Bitcoin mining has increasingly come to rely on the data and network infrastructure provided by mining pools.

As a result, many mining pools are not necessarily incentivized to broadcast their blocks to the network as fast as they can — regardless of latency in block propagation.

Selfish mining

To understand how this is possible, let’s first take a brief look at an older concept: “selfish mining”.

In short, selfish mining is a type of attack where miners find new blocks, but do not immediately broadcast these blocks to the network. The miners do, however, mine on top of any new found block they find themselves: they are mining “selfishly.” This gives them a head start to find the next block, while all other competitors are wasting their resources mining on top of an older block.

But hiding a new block is also risky. While a selfish miner hides a block, competitors may find a competing block. If this competing block makes its way through the network before the selfish miner’s block does, the selfish miner would have wasted its own resources by hiding the block: the block is now worthless.

For selfish mining to be profitable, therefore, the attacker requires a significantamount of hash power on the network — some 25 to 30 percent at least. And more than half of all hash power on the network is surely enough. Though, with a majority of hash power, the attack perhaps starts to resemble a 51 percent attack and not just a selfish mining attack.

A “selfish 51-percent attack,” if you will.

Luckily, no miner (or mining pool) currently controls over half of all hash power on the Bitcoin network, or even 25 percent. At least not directly...

Validationless mining

A lot of miners do engage in a type of “validationless mining” or (less accurately termed) “SPV mining”.

A Bitcoin block consists of several pieces of data: transactions, a timestamp, a nonce and more. One important piece of data is a reference to the previous block: the block header hash. The block header hash can only be generated using the block header of the previous block, which can in turn only be generated using all data in that block. The idea is that a miner cannot mine a new block before it has seen the previous block.

But there is a bit of a loophole. Using onlythe block header hash, miners can try and find the next block just as well — even without knowing the previous block header, nor any of the other data in the previous block.

This can potentially come in handy. If miners can get a block header hash before receiving an actual block, they can try and find a new block more quickly, which allows them to be more profitable.

And as it turns out, there is indeed a way for miners to often get a block header hash before receiving an actual block.

Spy mining

The mining pools that today account for most blocks mined on the network really consist of many individual miners: e.g., “hashers.” These hashers are all trying to find a new block on behalf of their pool, using a block header hash they received from their pool.

A pool, of course, wants its connected hashers to mine on top of a new block as soon as possible. So if a pool finds a new block, it immediately sends the block header hash to all its hashers for them to mine on top of. And since this block header hash consists of minimal data, and because there is a direct connection between the pool and all hashers, the block header hash typically gets to these hashers very quickly.

This is where spy mining comes in.

Competing miners (including competing mining pools) can receive this block header hash from the mining pool as well. They simply need to connect to the pool, much like all the hashers. But instead of hashing for the pool, these miners then take the block header hash and mine on top of it for themselves. They’re spy mining.

The pool that has the block header hashes may not even notice the difference between real hashers, and the spy miners. And if the pool does notice the difference, it may not even care. There’s no real disadvantage for the pool.

Perhaps unsurprisingly, therefore, over half of all miners on the network (by hash power) currently engage in spy mining.

Smaller problems

Unfortunately, spy mining — like all validationless mining — does present some problems.

Spy miners can’t check block header hashes for validity; they need all the other block data for that (the transactions, the nonce, etc). As such, spy miners have to place some trust in the mining pools they get the block header hashes from. This means that if the mining pool mines invalid blocks, it can — in a worst case scenario — lead to blockchain forks. (Much like the 2015 BIP66 blockchain fork.)

Additionally, mining pools can abuse the trust placed in them, especially if they can identify their spy mining competitors; for example, by feeding corrupt block header hashes to (some of) the spy miners. This tactic can cause spy miners to waste their resources, in turn making the Bitcoin network less secure.

And, until they receive the full block, spy miners can only mine empty blocks; that’s the only way to ensure they don’t include any double-spend transactions. This means that the total number of transactions throughput on the Bitcoin network is lower than it could be.

Luckily, however, in part thanks to several safeguards applied by spy miners, these problems are all relatively minor. While probably not ideal, risks to the Bitcoin network are limited.

Broadcasting

Widespread engagement in spy mining, however, enables a bigger problem.

Because so many miners (and pools) are spy mining, each time a mining pool finds a block and transmits the block header hash, this mining pool effectively directs a majority of all hash power to mine on top of that block — immediately. As such, there is no longer a big risk of this block being rejected and discarded for a competing block. Most of the network already accepts this block through the block header hash.

This practice, in turn, allows mining pools to launch selfish 51 percent attacks, simply by delaying broadcasting their new blocks to the network. More specifically, it allows mining pools to launch selfish 51 percent attacks against any miner that does not engage in spy mining, and against some identified spy miners. While a mining pool and its spy miners get a headstart mining on top of the new block, all other miners waste their resources. (At least for some time, depending on the safeguards imposed by spy miners.)

Amazingly, this even means that mining pools can gain advantage by being sloppy. Mining pools can, for instance, benefit from buggy software that delays broadcasting blocks by a few seconds — or more than a few.

Although mining pools should want to broadcast their blocks to the network as fast as they can, widespread engagement in spy mining seems to have skewed these incentives for the worse — with no clear solution in sight.

In a major step forward for collaboration in building decentralized apps on blockchain technology, NFX Guild, a Silicon Valley startup accelerator and Tel Aviv-based blockchain tech company Synereo have signed a partnership agreement to build an ecosystem of decentralized applications (dApps) on Synereo’s Blockchain 2.0 platform.

The proposed “decentralized internet” will use Synereo’s own blockchain technology to enable apps, websites and web-services to work without a central location or authority to verify the authenticity of the transactions between actors.

The company claims that the full Synereo tech stack, which has been in development for 5 years, has matured into a generic decentralized computation and storage platform, suitable for billions of users.

Hackathon Will Select Three Teams to Start

NFX Guild wants to find the best three teams for its dApp development program by sponsoring a hackathon. Hackathon winners along with “laureates” from Synereo’s grant program will be invited to apply for the NFX Accelerator Program.

The winning three teams will receive $120,000 in investment funds from NFX and an AMP grant from Synereo to build dApps on the blockchain.

James Currier, Managing Partner at NFX, explained the Guild's decision to choose Synereo’s technology for the project, stating:

“We have been looking at digital currencies, Blockchain, and the decentralized economy for over a decade. We’ve been looking for a time and a group that was not just cryptonerds, but that was practical, who wanted to build applications, who wanted to make it about the users experience of something great — not just about the technology and the math.”

Gigi Levy-Weiss, NFX Founding Partner, added:

“We found the Synereo team to have a unique combination of cryptocurrency and modern digital finance understanding alongside a real understanding of developer requirements and the know-how of how to build strong developer tools.”

Synereo’s website shows a total of $3.4 m raised in their current fundraising campaign during which the company is offering its AMP cryptocurrency at a fixed price and equity to qualifying investors at BnkToTheFuture.

Synereo’s Full Stack Blockchain Technology

Synereo was one of the first companies to design its own blockchain “stack” rather than using Ethereum’s or any other blockchain designs because, according to a blog on their website:

“Contemporary Blockchain solutions are still slow, wasteful and impossible to scale, and are overall unsuited to support the types of applications we’re used to on the net or for operating at the scale of Facebook or Twitter + Visa or Mastercard.”

The blog talks about Synereo’s own “World Computer” with billions of personal devices connected without a server farm or central point of control.

“Such a world computer wouldn’t only make the Internet virtually untouchable and censorship-resistant, it would also level the playing field and allow the commons to compete against the highly centralized leviathans of the contemporary tech industry.”

The company maintains that all the major players in the decentralization space have gone with their own blockchain technology, mainly to control and “own” the technology at the base of their stack.

As described in a recent article here, the Synereo blockchain stack can be described as:

“A four-layer system consisting of (from bottom-up): new blockchain technology called "RChain" or "Blockchain 2.0"; a distributed storage and content delivery protocol called "SpecialK"; its programming language for smart contracts and distributed apps called Rholang; and then the applications themselves.”

RChain: The Core Element of Synereo’s World Computer

According to the company, RChain can solve well-known problems of classical blockchain technology and is able to make blockchain based systems faster, cheaper to maintain and “infinitely scalable.”

RChain’s consensus protocol is based on the ‘Casper’ Proof of Stake design designed by developers including Vitalik Buterin and Vlad Zamfir of Ethereum, Synereo’s CTO Greg Meredith, Ethan Buchman of Tendermint, Rick Dudley of Eris Industries, and Aron Fisher of Colony. Casper provides a model where consensus is as cheap as possible for everyone, except for hackers conducting an attack.

Synereo's most prominent application to date is the Social Network, which launchedas an alpha version in August.

Like Steemit, the Social Network offers content on the network and rewards participants with Synereo’s currency AMP.

-Edward Peter Stringham is the Davis Professor of Economic Organizations and Innovation. Stringham is president of the Society for the Development of Austrian Economics, former president of the Association of Private Enterprise Education, editor of the Journal of Private Enterprise, editor of two books, and author of more than sixty journal articles, book chapters, and policy studies. His work has been discussed on more than 100 broadcast stations, including CBS, CNBC, CNN, Fox, Headline News, NPR, and MTV. His book, Private Governance: Creating Order in Economic and Social Life, is published by Oxford University Press.

This October, a new kind of blockchain conference will debut in Florida. BitFiniti aims to take blockchain from “behind the veil” and showcase the technology to select industries in hopes of raising awareness about the potential of the technology and creating a productive dialogue.

The conference, which will be held from October 30 to November 2 at the Fontainebleau Hotel in Miami Beach, can be described as a collision between blockchain-related ventures and different industries like insurance, financial services, real estate, healthcare, supply chain management, identity management, the charitable and nonprofit sectors, digital rights and others.

The key questions that BitFiniti will aim to answer for these industries are: Why should I be looking at the blockchain? What is it? What can it do, and not do?

Whereas most blockchain conferences are geared toward blockchain companies and insiders, BitFiniti’s goal is to reach out to non-blockchain industry thought leaders and experts, and to demonstrate with use-case innovations how blockchain can impact and improve their respective industries.

The conference will also include a warm up event consisting of informative blockchain education sessions for industry leaders.

A Unique Format

Each discussion will be led by two blockchain experts and two industry experts. Afterward, the panel members will be available for a Q&A session so that conference participants can have the opportunity to really understand how blockchain technology can impact the industries in question.

Similarly, while other conferences tend to separate booth operators from the presentation event, BitFiniti offers each participating company an opportunity to demonstrate on stage their blockchain innovations to potential partners and investors. Rather than relying on individual attendees to approach them, companies can make their pitches and explain how their models can benefit their target industries all at once.

The research looked at extensive quantitative analysis from 2,000 investors and 500 wealth firms across 10 world markets. It also looked at economic modeling and forecasting across 25 countries and expert opinions from over 40 market leaders, economists, technologists and investment specialists.

According to the report, broad based changes in the finance industry are upon us. This can be witnessed in the rise of women investors in North America and the growth of the middle class in emerging markets. At the same time, artificial intelligence, virtual reality, blockchain, and real-time analytics are a few of the smart technologies that investment providers are embracing.

As a result, it is predicted that by 2021, the convergence of these smart technologies will produce a huge impact on the wealth profession, unlocking the doors of global wealth across a diverse universe of investors. However, with a fast-paced marketplace, it is important for investors to understand their customers’ needs and behaviors, and make the necessary technology changes to meet their requirements.

Bob Reynolds, President and CEO of Putnam Investments, commented in the report that ‘the business moves in cycles, and some are severe.”

Even for experienced professionals the market can be a particularly difficult place. Consider the Great Recession of 2008, which saw industry leaders having to navigate their companies through a debt crisis, a market slowdown, and a drop in oil prices.

As a consequence, economist Dr. Nouriel Roubini said in the report that “mediocre growth and low interest rates have become the new normal.”

However, while Roubini believes that a storm is looming, there are others who think that the biggest market upheaval will originate from within the industry.

“The wealth sector is going through a tremendous, fast shift,” said Dirk Klee, Chief Operating Officer of UBS. “Not because of regulation or low interest rates, but from customers and their desire for a digitally enabled experience.”

The report found that wealth service providers and investors agree that technology is revolutionizing the industry. From those surveyed 46 percent of service providers and 52 percent of investors believe that heightened competition and the growth of fintech companies are the main drivers of change over the next five years.

Watching Emerging Markets

The report found that only 11 percent of firms and 31 percent of digital leaders have systems in place for monitoring next-generation technologies. In a bid to meet customers’ needs, it’s important to stay ahead of the game by catching new trends early.

The most influential technologies to watch are the fast-growing, smart technologies that can enhance a customer’s experience and put one firm ahead of another. Technologies targeted for growth by 2021 include artificial intelligence at 128 percent, telematics at 72 percent, blockchain technology at 43 percent, and geospatial/location-based technology at 26 percent.

Alex Tapscott, Founder and CEO of Northwest Passage Ventures, states in the report that blockchain is a game changer for the wealth profession. However, speaking to Bitcoin Magazine, Spiros Margaris, venture capitalist and founder of Margaris Advisory, said that he believes blockchain technology will eventually be a game changer for some industries and could be a very attractive technology for the wealth management industry by cutting out the middleman and providing faster settlements at lower costs.

“However, in my opinion, it’s over-hyped in its role as the magic bullet that will bring huge benefits and savings wherever it is applied,” he added.

Instead of blockchain, artificial intelligence (AI) and the Internet of Things (IoT) are predicted to be more transformative for fintech by 2021. According to a Forrester Research report released earlier this month, it is these two technologies that will provide fintech companies with a bigger opportunity to grow, helping to expand customer engagement levels over the next five years.

Margaris agrees, stating that companies seeking opportunities to grow and expand will see faster results by investing in AI and IoT compared to blockchain.

“We are at the early stage where the blockchain industry is still searching to find the best use cases for a mainstream adoption,” he said.

ARelatively New Market

Blockchain was first outlined in 2008, but as a relatively new technology it has garnered plenty of interest, particularly among financial services companies. According to the report, 45 percent of providers say that they are now exploring blockchain, while 64 percent expect to expand their use in five years.

Of course, while there is a lot of interest in blockchain, the broader picture demonstrates that experimentation characterizes most of its current use, such as happens in technology accelerators, and that more needs to be done to increase its adoption.

“The more companies, from incumbents to fintech startups, experiment with proof of concepts for blockchain implementations, however crazy or useless they might seem at first glance, the faster we will see real advances and benefits happening,” Margaris said.

While blockchain use-case breakthroughs might not happen in the next five years, Margaris is of the opinion that the likelihood of this happening will increase due to investments made in the sector and the many participants who want to benefit from a possible breakthrough.

Tonight we talk with Brian Sovryn about multiple topics including the history of decentralization and Bitcoin vs Altcoins. A great talk very happy to have Brian on.This is an unedited version with all of the conversation between commercials left in.FB live video:http://ift.tt/2cDkMQa

First announced on the cryptography mailing list in 2008, Bitcoin was the embodiment of a decade-old cypherpunk vision. A digital currency not controlled by any government, bank, or company existed in the hearts and minds of hackers and cryptographers long before most even considered the concept viable.

Since its launch in 2009, Bitcoin ignited a new industry, with interest reaching far beyond the small group of ideologues. Its blockchain technology today even serves as an inspiration for the very governments, banks, and companies the pioneering cryptocurrency was designed to subvert.

The third annual edition of the Hackers Congress Paralelní Polis (HCPP16), set to start this Friday, September 30, in Prague, will remember Bitcoin’s roots. The three-day gathering in the markedly black Paralelní Polis building will bring together cypherpunks and crypto-anarchists from around the Czech Republic, Europe and the rest of the world.

To learn more about the event, Bitcoin Magazine spoke with Martin Sip, project coordinator for Paralelní Polis and HCPP16 organizer, and Pavol Lupták, Paralelní Polis co-founder.

HCPP16 is very much a product of its hosting location, Paralelní Polis. What kind of place is this?

Martin: Paralelni Polis is a state-free NGO started by local guerrilla artist group Ztohoven and the Slovak hacker-space ProgressBar. It’s a space for the promotion of ideas and technologies that give people more freedom online — mainly the tools of cryptography and cryptocurrencies.

Pavol: Paralelní Polis is named after the original ideas of Czech Cold War era political thinker and dissident, Václav Benda, about parallel, underground societies. We are mostly voluntaryists or anarchists who believe that Benda’s vision can be achieved on the internet with crypto-anarchist technologies.

What exactly is crypto-anarchy?

Martin: Simply put, crypto-anarchy is the idea that people can govern and organize themselves without governments, by using the tools of cryptography, cryptocurrencies and other means of decentralization.

Pavol: With these tools, we can build a more effective, a more free and a more voluntary society. We can, for example, have access to fully decentralized anonymous cryptomarkets with stronger reputation and escrow services, where everything is 30 to 50 percent cheaper than in the markets regulated and taxed by governments.

And we don't even need the acceptance of a majority of people or politicians. Human nature — the fact that people primarily prefer to suit their individual needs — can ensure that no one will be willing to pay government tax in the virtual internet world. Crypto-anarchists can demonstrate how the current political systems based on coercion — taxes — could collapse.

And you believe that would be a good thing?

Pavol: Our current society is just too complex and global to be hierarchical with authoritative governments. Too complex to follow and enforce monolithic laws and regulations for so many heterogeneous people.

If we want to keep our complex society free, we believe this can be achieved only in a fully decentralized, peer-to-peer and mutually voluntary way. All other solutions will probably end up in some kind of totalitarian world.

Crypto-anarchists also spoke of assassination markets and other quite dark concepts…

Pavol: Yes, Jim Bell’s Assassination Politics is probably the best known of these. Though, despite the fact this is technically feasible, there is no evidence this concept has been ever been applied.

I think and believe that the benefits of crypto-anarchy will overcome their negative impact. Like the internet, which also offers a huge playground for pedophiles, Satanists, Nazis and terrorists... No one wants to ban the internet just because of this.

And if you don't do evil, don't intervene to the other people’s lives, other people shouldn't be motivated to contribute to your death. Some dark crypto-anarchists even argue that, if there was crypto-anarchy 100 hundred years ago, we would never have people like Hitler, Stalin and other crazy dictators rise to power... We wouldn’t have had world wars... and maybe in some way they are right.

But what’s most important to realize — despite all negative consequences of crypto-anarchy — it cannot be stopped now. It's here and people have to cope with that.

Pavol: One of the speakers is Timothy C. May, the technical and political writer who probably coined the term “crypto-anarchy” inThe Crypto Anarchist Manifesto, as well as the phrase The Four Horsemen of the Infocalypse. As May’s crazy predictions and visions are now coming true, he will be reflecting on 30 years of crypto-anarchy.

Martin: Another very notable speaker is Paul Rosenberg, author of the crypto-anarchist bible:A Lodging of Wayfaring Men, and more recently the book,The Breaking Dawn. He is also founder ofCryptohippie which provides online privacy services, and he is author of the Freeman's Perspective blog that invites readers “to see the world as it really is.” During the Hackers Congress, Paul will give a talk on “How To Evolve and Hack Your Soul.”

Pavol: And then there’s Smuggler, the author of the Second Realm Manifesto. And of course people like Sam Patterson, the father of OpenBazaar... Really, I personally consider all our speakers to be extraordinary in some way, with a strong respect for their work, and past or current activities.

Where does Bitcoin fit in all this?

Martin: Bitcoin enables the unregulated exchange of value on a global scale, which is something we didn't have before and will have profound impact on a society. People will start doing things that they couldn't do before, and organize themselves in novel communities and structures. I think there will a big restructuring of society. Governments, banks, and even other corporations as we know them will dissolve or change in a profound way.

Pavol: Bitcoin is not just about changing business and creating new commercial opportunities. We really do perceive Bitcoin as liberational tool that can change the whole society. And I think its inventor, Satoshi, perceived Bitcoin in a similar way.

While the Bitcoin-community was once perhaps dominated by this kind of revolutionary sentiment, you may be of a dying breed...

Pavol: I don’t think so at all. At least our HCPP conference is more and more popular every year, with still new crypto-anarchists joining and related projects starting.

Martin: I would agree that the crypto-anarchist sentiment is not as prevalent in the Bitcoin community these days as it used to be. But these strong ideas matter very much, even if they are lived by a only small part of the community. Because that is where the strongest innovators come from.

Is that what you’re seeing in Prague as well?

Martin: Bitcoin is doing great in the Czech Republic, and I am proud that most Czech Bitcoin companies are part of the community around Paralelní Polis. We have several Bitcoin companies with global impact like SatoshiLabs, the creator of the first hardware wallet — Trezor — and the first ever mining pool: Slush’s Pool. There’s also General Bytes, a major Bitcoin ATM producer that’s also responsible for the Bitcoin payment system at the congress. And Prague itself is very active in bitcoin acceptance on the ground — according to Coinmap.org there are over 80 physical shops accepting bitcoin. That’s a lot for a city with just over 1 million citizens.

Reason enough to head over to Prague this weekend...

Pavol: There are a lot of Bitcoin conferences around the world, focused on blockchain, business, new technologies and that sort of stuff. But none of these reflect the radical political and technological ideas of how crypto and anonymization tools could significantly change our world. That's what we are trying to do. It's an underground Bitcoin conference, and probably the only one true crypto-anarchist conference on the planet.

Martin: And the reason the Congress is relatively long, is that it is also an informal yearly gathering of the world community around Paralelní Polis. We want to give old members as well as new members the chance to interact, inspire, network or just spend more time with each other and be friends.

Pavol: If you sympathize or believe in crypto-anarchist ideas, there is no better conference to visit than HCPP 2016.

De-globalization is not just about Brexit and rising U.S. protectionism. It is much more than that. It's a pervasive negative attitude regarding globalization that includes various autonomous and sometimes antagonistic movements, such as anti-Western universalism in Eurasia, anti-federalism in Eastern Europe, Piketty-type neo-Marxism in Western Europe, as well as the Islamic State and the like from the Mediterranean to Central Asia.

What's at stake here is the post World War II intellectual construct positing that if people from all civilizations find it profitable to be acquainted through exchange, they will become interdependent and identify with mankind as a whole, peacefully.

Globalization is losing ground fast to de-globalization — the view that a globalized economy generates intolerable inequalities between people, classes, nations and civilizations. To combat inequality, the argument goes, governments need to regain their sovereign rights and close their national borders.

Inequality within societies has widened considerably in recent decades. But this is not because of international trade or movements of people; after all, cross-border trade and migration have been happening for thousands of years. So what is fueling it? To answer that question, we must consider what it is about globalization that is generating returns for the wealthy. The reply: the capacity to combine.

A central aspect of globalization is the careful documentation of the knowledge and legal tools needed to combine sovereign rights and property rights over seemingly useless single assets (electronic parts, legal rights to production, and so on) into complex wholes (an iPhone), and appropriate the surplus value they generate.

It is well-organized knowledge documented in clear and accessible ledgers that faithfully describes not only who controls what and where, but also the rules governing potential combinations, which makes it possible for the multiple components from ten countries to be brought together to manufacture one wooden pencil in Germany; it is also the story behind the hundreds of combinations that are required to assemble a mechanical Swiss watch and the thousands that it took to create flight navigation systems in the U.S. or over the world wide internet.

It is also the knowledge that informs us which authority has the sovereign right to regulate exchange, who has the property rights to any given asset and who can use both of these rights to leverage that asset. That is also how we know what can be leveraged and whether a given document can be used to perform over a dozen functions that are required to make complex combinations, including those acting as pledges against investment, collateral for credit, credentials for receiving public services and property rights containers to capture and store the surplus value created by the combinations.

After two decades of fieldwork in some 20 countries with over 1,000 researchers, my organization, the Institute for Liberty and Democracy (ILD), has ascertained that 5 billion people — out of 7.3 billion around the world — are not documented in national ledgers or in anything approaching a manner easy to compare, measure or mix on an international scale. Instead, their entrepreneurial talents and legal rights to assets are recorded in hundreds of scattered records and rules systems throughout their countries, making them internationally inaccessible.

The Missing Links in the Legal Chain and Blockchain

This lack of consolidated, documented knowledge — and not trade — is the principal reason for global inequality. The lawyers and politicians who draft and enact the legislation and regulations that govern globalization are dramatically disconnected from those who are supposed to implement the policies at the local level, and those who write up and control the ledgers that embody the social contracts that are respected on the ground. In other words, the legal chain is missing a few crucial links.

Experience in Japan, the United States and Europe shows that putting in place a straightforward legal approach to ensuring equal rights and opportunities can take a century or more. But there is a faster way: treating the missing links as a break not in a legal chain, but in a knowledge chain.

We at the ILD know something about knowledge chains. We spent 15 years adding millions of people to the globalized legal system by bringing the knowledge contained in marginal ledgers into the legal mainstream — all without the help of sophisticated software. But we do not have decades more to spend on this process; we need to bring in billions more people, and fast, if we want globalization to be less unequal. That will require automation.

Over a year ago, the ILD began — with seed funding from the Omidyar Network and the brilliant and patient coaching of Bill Tai from Silicon Valley — to determine whether information technology, and specifically blockchain (the transparent, secure, and decentralized online ledger that underpins Bitcoin), could enable more of the world's population to get in on globalization. The answer is a resounding yes.

By translating the language of the legal chain into a digital language — an achievement that required us to develop a set of 21 typologies — we have created a system that could do at least four important things:

First, identify, locate and capture any ledger in the world and make it public;

Second, make compliance effective by digitally placing any international contract in the ledgers — local or global — where the reputation of the contracting parties is at stake and commitment is more likely;

Third, we have been able to compress into 34 binary indicators the questions that computers have to ask captured ledgers to determine which provisions should be made in existing legislation to make globalization a more equal process;

And, fourth, use those same 34 indicators to insert into "blockchain smart contracts" the links missing in the legal chain, so that globalized firms and non-globalized collectives can start making fair deals without needing to wait for local rules to adapt to global legislation.

Maybe the language that will help us globalize in equal terms is not English but the binary language of automation.

A year ago, Bitcoin Magazinehighlighted the work of U.S. Congress Representative Jared Polis and noted his work meeting with politicians and businesses, promoting the many economy-building possibilities of Bitcoin and, by extension, blockchain technology.

A year later, Rep. Polis, a Democrat from Colorado, along with Rep. Mick Mulvaney, a Republican from South Carolina, announced the formation of the first congressional caucus to promote and educate members of Congress, and the general public, about the potential of digital currencies and other blockchain-based technologies.

To increase its influence and effectiveness, the new caucus is bipartisan, welcoming members from both political parties.

“Congressional caucuses are very important for like-minded members of Congress to work together toward common policy goals,” said Jerry Brito, Executive Director of the Coin Center advocacy group. “We are very excited by the formation of the Congressional Blockchain Caucus and look forward to continuing working with its members to chart a path forward with the same type of light touch regulation that the early internet benefited from just a few decades ago.”

Recently Brito was named to the Politico Top 50 influencers in Washington D.C., along with Coin Center board members Marc Andreessen and Fred Wilson.

Rep. Polis is also an acknowledged “thought leader” in the digital currency movement due to his long-term support. He was the first politician on the Hill to accept donations in bitcoin.

“The blockchain has boundless potential," Rep. Jared Polis said in a news release.

"From cryptocurrencies to supply chains to banking to property titling, blockchain-based solutions have the ability to decentralize cybersecurity and revolutionize many industries. It's vital for Americans, businesses, and members of Congress to learn about blockchain technology so the U.S. can continue to secure its stance as the global leader of ingenuity.”

“The Blockchain Caucus will focus on raising awareness, advancing ideas that foster growth, and safeguarding consumers. I'm excited to work alongside Rep. Mulvaney, and I look forward to all that we'll accomplish."

Republican Representative Mick Mulvaney from South Carolina has been active in meeting with groups like Coin Center that promote the use of bitcoin.

“I’m excited to partner with Congressman Polis to found the Congressional Blockchain Caucus,” said Rep. Mulvaney. “Blockchain technology has the potential to revolutionize the financial services industry, the U.S. economy, and the delivery of government services and I am proud to be involved with this initiative on the ground floor.”

“For the past two years we have worked with Representatives Mulvaney and Polis to educate their colleagues through briefings and other events,” said Brito, “and the new Congressional Blockchain Caucus will be a wonderful new platform to continue these efforts.”

“Their forward thinking leadership on blockchain technology in Congress is unmatched,” he added.

The Coin Center will work with the new caucus through the fall elections and will be well positioned to recruit new representatives as they are elected.

Brito is looking forward to the challenge. "With a new Congress coming starting in January, the caucus will be a great platform from which to educate new members about the technology. As more members join the caucus I would expect to see a policy agenda develop. For example, I would love to see the caucus take up the federal safe harbor for non-custodial uses of open blockchain networks that Coin Center recently proposed.”

“Coin Center has been an invaluable resource to help educate me and others on the interworkings, importance of, and issues facing cryptocurrencies and blockchains,” said Rep. Mulvaney. “I look forward to continuing my partnership with Coin Center, and developing relationships with other groups involved in this initiative. I encourage Members of Congress to join the Caucus and get involved as blockchain technology becomes more widely used across communities and companies.”

In what’s turning into the “year of the hack,” security issues are increasingly top of mind for those working in the Bitcoin and blockchain space.

Security expert Pamela Morgan is CEO of Third Key Solutions, Attorney at Empowered Law PLLC, and board member of C4. She and her partners at Third Key Solutions, Andreas M. Antonopoulos (CTO) and Richard Kagan (Business Advisor), provide advice and security solutions for wallets, exchanges, crowd sales, and new innovative Bitcoin and blockchain projects.

Bitcoin and Blockchain "More Secure Than Ever Before"

In an interview with Bitcoin Magazine, Pamela Morgan noted the contradiction that despite recent events Bitcoin and blockchain technologies may actually be more secure now than ever before:

“Bitcoin is more secure than it has ever been and it keeps getting stronger. The same is true for several other blockchains that increase their security as they mature and broaden their reach. But this is seemingly contradicted by frequent hacks affecting many users.”

“The contradiction lies in a subtle but important difference: Funds controlled directly by individuals in a decentralized manner and secured by decentralized blockchain protocols are extremely secure.”

“On the contrary, when a single entity concentrates control of funds from many individuals with custodial (aka hot) wallet accounts or poorly implemented large cold storage wallets, they become an extremely attractive target — a honeypot for attackers.”

Security Becomes an Important Priority for Ethereum

One such entity, the Ethereum DAO, suffered a cyber attack in June (losing one-third of its total funds) and the subsequent split into Ethereum and Ethereum Classic.

This tested Ethereum’s vulnerabilities and, among other measures, resulted in the hiring of Martin Holst Swende, a former NASDAQ information security specialist.

Swende will work with Ethereum Foundation-funded projects to enhance their security and will be responsible for Ethereum’s overall security during its ongoing development, working with smart contract developers and creating a special security website.

“Unintended Consequences Such as the Re-entrancy Bug”

We asked Morgan about her take on the unprecedented Ethereum DAO attack. She told us:

“Rapid and disruptive innovation is inherently risky. You don’t get to the moon without blowing up a few rockets and we won’t get to secure, large-scale smart contracts without blowing up a few DAOs. The same basic mantra of business applies here too — fail fast, fail cheap. The DAO achieved the former.”

“Writing smart contracts that control funds securely is difficult. Over time, the security-critical components will mature through many iterations and many losses. Even though the Ethereum platform is past its beta, every new smart contract and component should be treated as pre-alpha software.”

“Smart contracts need to mature and the Ethereum platform doesn’t magically make them robust. Both the platform and the contracts will mature through iteration together. The funds controlled by smart contracts should be proportional to their degree of maturity and testing.”

“Too much money was invested too quickly in an immature and overly complex contract. Complexity is the enemy of security. The flexibility introduced by a Turing complete, high-level smart contract language brings with it unintended consequences, such as the reentrancy bug that was introduced in the DAO contract.”

Bitfinex: One for the Books

The August hack of Hong Kong-based bitcoin exchange Bitfinex, one of the top bitcoin traders globally, to the tune of roughly $70 million, sent a chill through the digital currency world and shook any complacency around the security of bitcoin exchanges.

Some experts have tied the hack to a shaky bitcoin price and wonder if it will take a while to restore confidence; others believe that Bitcoin’s security has been affirmed since Bitfinex was able to avoid a shutdown and Bitcoin's blockchain retained its security and functionality in spite of the hack.

In his response to the Bitfinex attack, Stefan Thomas, one of the original Bitcoin developers and Ripple’s Chief Technology Officer said, “There’s no history of how to write secure code. It is not surprising that it would be easy to miss typical problems.”

Morgan commented:

“The architecture of a bitcoin service provider, such as an exchange, holding funds for tens of thousands of users is inherently flawed. Re-centralizing data, in this case bitcoin keys, is the opposite of the decentralized architecture of Bitcoin itself.”

“Multisignature technology has been widely misunderstood as a security “fix” but multisig is simply a tool. Two entities controlling the keys and funds of 100,000 users is a bit better than one entity, but not as good as 100,000 points of control.”

“No one knows how to secure large concentrations of data. The data breaches of companies like Yahoo, Target, Best Buy and even the NSA demonstrate this point. The very same issues of scale apply to bitcoin data. The difference between a bitcoin theft and identity theft is that bitcoin users feel the sting immediately.”

Staying One Step Ahead of the Hackwith Formal Verification

“Formal verification” is the new buzzword in the security business. Morgan thinks it is likely that eventually, “most smart contracts will incorporate formally verified components to build a strong foundation, and use more flexible coding practices for the rest of their contracts.”

“Formal verification is an interesting methodology that rebalances the tradeoff between flexibility and security,” she added. “Many programmers will find it difficult to write code that can be formally verified; but for core services, such as deciding who owns a contract and who controls funds (authentication, authorization, policy) formal verification could deliver much more secure code.”

“Decentralized Consensus is the Innovation that Matters.”

A number of developers have argued that the security flaw in blockchain technology is its requirement to achieve distributed consensus on new security measures.

Updates to software in blockchain are inhibited because a majority who run the software must agree to the rollout.

However, Morgan takes a different view:

“We already have systems that are centralized, controllable and can be censored — like Ripple. They are not novel. They are not disruptive. They are business-as-usual with the word “blockchain” painted on as a thin veneer of innovation. Decentralized consensus is the innovation that matters.”

“Overall, I attribute the hacks in our industry as symptoms of growing pains in a fast moving space. Certainly some are caused by sloppiness, bad actors, and the re-introduction of centralization, but I believe most of it is simple human error in the face of unexplored territory and complexity. We simply don’t understand all the risks and there’s only one way to learn — real money, real risk, real people.”

“Eventually security functions smart contracts will be built by combining battle-hardened and mature modules for common functionality — much like cryptographic libraries and random number generators, people will not write their own. Until then, we try, we test, we fail and we try again. As these systems iterate and mature, they become more and more secure, more useful, and therefore more valuable.”